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Tax Principles, Product Differentiation and the Nature of Competition

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Author Info

  • Nigar Hashimzade

    ()

  • Hassan Khodavaisi

    ()

  • Gareth Myles

    ()

Abstract

We analyze the choice between the origin and destination principles of taxation when there is product differentiation and Bertrand competition. If taxes are redistributed to consumers and demand is linear the origin principle dominates the destination principle whatever the degree of product differentiation and extent of economic integration. With nonlinear demand the origin principle dominates if there is sufficient economic integration. When the social value assigned to tax revenue is higher than the private value, the destination principle dominates for intermediate values of product differentiation and economic integration. The same results are also shown to hold with Cournot competition. Copyright Springer Science + Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s10797-005-0411-1
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 12 (2005)
Issue (Month): 6 (November)
Pages: 695-712

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Handle: RePEc:kap:itaxpf:v:12:y:2005:i:6:p:695-712

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: commodity taxation; imperfect competition; Bertrand competition; Cournot competition;

References

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  1. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," European Economic Review, Elsevier, vol. 34(2-3), pages 489-504, May.
  2. Andreas Haufler & Michael Pflüger, 2003. "International Commodity Taxation under Monopolistic Competition," Discussion Papers of DIW Berlin 332, DIW Berlin, German Institute for Economic Research.
  3. Lockwood, B., 2000. "Tax Competition and Tax Co-Ordination Under Destination and Origin Principles: A Synthesis," The Warwick Economics Research Paper Series (TWERPS) 567, University of Warwick, Department of Economics.
  4. Austan Goolsbee, 2000. "In A World Without Borders: The Impact Of Taxes On Internet Commerce," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 561-576, May.
  5. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
  6. Michael Keen & Sajal Lahiri, 1994. "The comparison between destination and origin principles under imperfect competition," IFS Working Papers W94/08, Institute for Fiscal Studies.
  7. Ben Lockwood & David Meza & Gareth Myles, 1994. "When are origin and destination regimes equivalent?," International Tax and Public Finance, Springer, vol. 1(1), pages 5-24, February.
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Citations

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Cited by:
  1. Haufler, Andreas & Schulte, Christian, 2007. "Merger Policy and Tax Competition," Discussion Papers in Economics 2074, University of Munich, Department of Economics.
  2. Ourania Karakosta & Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2009. "Does Indirect Tax Harmonization Deliver Pareto Improvements in the Presence of Global Public Goods?," CESifo Working Paper Series 2668, CESifo Group Munich.
  3. Scott McCracken & Frank Stähler, 2010. "Economic integration and the choice of commodity tax base with endogenous market structures," International Tax and Public Finance, Springer, vol. 17(2), pages 91-113, April.
  4. Gareth D. MYLES, 2006. "Tax policy and European Union governance," Departmental Working Papers 2006-10, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  5. Nigar Hashimzade & Hassan Khodavaisi & Gareth Myles, 2011. "Country characteristics and preferences over tax principles," International Tax and Public Finance, Springer, vol. 18(2), pages 214-232, April.
  6. Ourania Karakosta & Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2014. "Indirect tax harmonization and global public goods," International Tax and Public Finance, Springer, vol. 21(1), pages 29-49, February.
  7. Andreas Haufler & Christian Schulte, 2011. "Merger policy and tax competition: the role of foreign firm ownership," International Tax and Public Finance, Springer, vol. 18(2), pages 121-145, April.
  8. Kenji Fujiwara, 2013. "Pareto-improving tariff-tax reforms under imperfect competition," Discussion Paper Series 110, School of Economics, Kwansei Gakuin University, revised Oct 2013.
  9. Fujiwara, Kenji, 2014. "Pareto-improving tariff-tax reforms under imperfect competition," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 12-20.
  10. Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2007. "Imperfect competition, indirect tax harmonization and public goods," International Tax and Public Finance, Springer, vol. 14(2), pages 135-149, April.

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